Will government help hurt electric cars like the Chevy Volt?

Battery-powered cars like the Chevy Volt and Nissan Leaf are benefiting from major government support. And that’s what may end up depriving this important technology from crucial market-driven innovation.

By
Martin B. Robins /
August 6, 2010

Barrington Hills, Ill.

The electric plug-in vehicles Chevy Volt and Nissan Leaf will soon hit the market, spurring hopes that “green” cars are about to go mainstream.

To the extent that consumers embrace them, they will reduce our need for foreign oil and involvement with anti-American regimes such as those in Iran, Libya, and Venezuela. However, based on our experience with other industries, most notably personal computers (PCs), there are serious concerns about whether we are taking the right steps to help these innovative autos succeed in the market.

Simply put, electric cars are not currently commercially viable for most Americans. To become viable, they must evolve quickly. But high levels of government support, while well-intentioned, may be thwarting this evolution.

Batteries need improvement

Problems are already evident.

In a test drive, Wall Street Journal reporter Joseph White found several issues with one new electric model, the Mitsubishi i-Miev. He was able to drive only about 12 miles before being advised by the car to recharge. The stated range is up to 100 miles on city streets, but his use of the air conditioner apparently drastically depressed actual range.

The Chevy Volt will go no more than 40 miles without recharging. A separate gas engine extends the range considerably further, albeit by burning gasoline.

The Nissan Leaf, meanwhile, has a range of only about 100 miles and no gas engine. The Volt carries a sticker price of $41,000; the Leaf costs $33,000.

Even with a generous $7,500 federal tax credit, these prices are out of reach for most consumers. And their limited ranges make them impractical for all except residents of densely populated urban areas who typically drive very short distances. There are always early adopters of the latest technologies, but to go mainstream, these cars must make vast improvements in battery technology – a point even Ford President Alan Mulallay acknowledges.

This challenge should not phase us; many of our most popular products, especially PCs, were introduced in exactly the same way and quickly evolved into the economic mainstream. Somewhere out there, in the proverbial garage, an inventor is working away to solve the problem – or is there?

There’s the rub: Circumstances surrounding electric cars are quite different from those that “fueled” the growth of the PC.

Electric cars are being pushed to market through government fiat, direct and indirect. There’s the direct involvement of the government’s task force with Chevy’s parent, Government – I mean General – Motors. And there’s the recent drastic increases in fuel economy standards, not to mention the large tax credits for purchasers of electric cars.

Personal computer pioneers

Contrast this with the environment that Bill Gates, Steve Jobs, Andy Grove, and other computer pioneers faced 35 years ago at the dawn of the PC era. There were no government mandates for processor speed, hard drive capacity, central memory, application features (Word, Excel, etc.), or anything else – and no tax incentives.

These PC entrepreneurs had to adapt to the demands of the marketplace or go away. We all know what happened. The first PCs were highly impractical in every respect and of interest mainly to hobbyists and those who had to be first to own everything cool.

But the PC pioneers listened to the feedback from the marketplace and promptly refined their products accordingly, as they continue to do. “Guys in garages” knew they could get rich if they came up with real breakthroughs that made it in the market.

Messrs. Gates, Jobs, and Groves knew their products would wither away if they didn’t provide something that was truly valuable and affordable. Without the support of government funding, tax credits, special laws, or any other crutch, they knew they had to earn the trust and confidence of customers.

We should all worry a great deal about whether government involvement in the auto industry is going to choke off the progress we all need for electric cars to do what we all need them to do. Government efforts to push these leading-edge vehicles on the public end up distorting the market’s vital communication between consumers and high-tech developers.

Further, federal involvement may strip out on of the crucial – if crass – incentives for today’s inventors: the desire to get really rich by perfecting a valuable technology. Without this carrot, the proverbial “guys in the garage” may not spend the extra time to make a breakthrough. And we’ll all be the worse for it.

Let’s tell our policymakers directly and at the polls that the initiative to develop clean-energy cars for mass-market consumption is too important to founder. We have to make sure our best minds are properly motivated to keep working on it. Otherwise, these cars may never get out of first gear.